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This 18th century monolith is ripe for reform

Hardly an hour passes without talk of some new reform in the public sector. For at least thirty years change has been a constant in public services. Indeed the job of a public sector leader – perm sec, chief executive or whatever – seems to involve little else but going round telling everyone how much the organisation needs to change. You wonder how they find time to do whatever it is the organisation is supposed to do when it is not reforming itself or being reformed.

The joint-stock company model remains essentially unreformed since the time of the South Sea Bubble in 1711. Pic: Library of Congress.

Any failure in a public sector body – or sometimes even by a single public servant – is met with instant and shrill demands for the entire system to be changed. Mid-Staffs was not just a badly run hospital; it was symptomatic of a disease afflicting the entire NHS (if this were true, of course, there would have been no Francis Inquiry, as Mid Staffs wouldn’t have stood out). For these people, it doesn’t matter how much public services have been buggered around with, they are always ‘unreformed’. Only one reform counts: making them more like the private sector, preferably by transferring them to the private sector altogether. This is so widely accepted – even by people on the left – that an outsider would imagine our private sector to be a gleaming model of efficiency and service.

Actually, quite a lot of the private sector is rubbish. Banks, insurance companies, supermarkets, the railways and the utility and oil companies are among the most despised and distrusted organisations in the country. If you can’t find somewhere affordable to live, if your broadband doesn’t work, if your pension scheme isn’t delivering what was promised, if you can’t get a seat on a suffocating train, if an elderly relative has been abused in a care home – it’s the private sector that has failed, not the public. It’s private sector firms that brought you horse burgers, phone tapping, Windows 7, incendiary fridges, PPI, ‘self-checkouts’ and – the daddy of all cock-ups – the great recession itself.

This is the culture we cherish so much we’re extending it further and further into our lives. If you can’t get a GP appointment, your local school is failing, escaped cons are roaming your neighbourhood – even if your Boris Bike breaks down – it’s more and more likely that a private sector firm is responsible (usually Serco). We hear a good deal about the failure of big ‘government’ IT contracts – but a good deal less about the firms who failed to deliver what they were contracted to do. So why do we only ever talk about reforming the public sector, never the private?

Most private firms would wilt in minutes under the kind of scrutiny public sector managers have to deal with every day. There’s no Francis Inquiry into the obviously systemic failure of the banking sector, just a compliant Parliamentary commission under former banker and oil executive Andrew Tyrie. Ministers mull over prosecuting nurses for poor care, but pass over evidence of criminal fraud (LIBOR, PPI or pensions for example) by banks and insurance companies. There’s no shake-up of our greedy utility companies, no probe into BT’s monopoly stranglehold on broadband, no action on the eternal failure of the railway companies to provide the service passengers pay through the nose for. Just tame regulators, stuffed with industry insiders, presiding over cosy cartels that fob us off with the same products and the same lousy service under different brand names.

When Serco was caught overcharging the Ministry of Justice – ripping off you and me – justice secretary Chris Grayling said it was ‘indefensible and unacceptable’, but he didn’t do anything. After fraud and mismanagement were uncovered in the welfare to work scheme run by A4e, the company was eventually sacked. Good. But where was the inquiry? Where was the policy review? Where is the evidence that ministers have learned anything from their mistakes? (The employment minister at the time was, incidentally, one Chris Grayling.)

At most, you get the Daily Mail or government ministers railing against individual firms for their failings. But you can’t blame Scottish Power for putting up its prices, or care provider Southern Cross for trying to make a quick buck out of its property portfolio. This what those companies do, it’s what they have to do. They have one objective and one only – maximising shareholder value. And they’re not always very good at that.

There are many models in the public sector, but only one in the private. The joint-stock profit-maximising company is simply not fit for purpose in many areas. It has proved a hopeless way to run natural monopolies like railways and utilities. It’s not up to providing health or social care, as has been proved time and time again. It cannot manage competing priorities – the way public services have to do every day – because it has only one priority. Why do we think this creaking 18th century model is so perfect, so superior to everything else, that it can never be challenged and must be applied to everything we do as a society?

With only one model, all large corporations are forced into the same mode of behaviour: short-termism, cost-cutting, service degradation, price hiking, misleading marketing and pressure sales tactics. Even charities have started to behave like this. But why do all companies have to be profit maximising? Some, while needing to generate profits to stay in business and invest for the future, might have purposes other than squeezing the last ounce of profit out of their suppliers and customers. Might some have social interests, or the interests of their workers or clients at heart? Actually, many small businesses have such diverse priorities because of the way their owners choose to run their businesses or live their lives. But big corporations, with only one model to follow, have no choice but to behave the way they do.

Cameron: “There is such a thing as society, it’s just not the same thing as the state.” It’s not the same thing as SERCO either.

If he’d meant a word of it, David Cameron might have been onto something with the Big Society. No, it doesn’t always have to be the state, but it doesn’t always have to be the big private corporation either. And might not the ‘third sector’ also be an alternative to the private sector as well as the public?

There are failures in both private and public sectors. But where the public sector is expected to innovate and reform in response to failure, the private sector gets away with shrugging its shoulders and wringing its hands. It’s as if the private sector was created by God 300 years ago, and must be left unsullied by human hands. It’s time we changed that.